* Oil falls below $78 after Fed raises discount rate
* Sentiment weak on higher-than expected rise in crude
stocks
* Dollar strength continues to undermine oil, commodities
By Seng Li Peng
SINGAPORE, Feb 19 (Reuters) - Oil fell more than $1 to
below $78 a barrel on Friday, pushed by the stronger dollar
after the Federal Reserve raised an emergency lending rate and
dampened by higher-than-expected crude inventories in the
United States.
The Fed's move to increase the discount rate to 0.75
percent from 0.50 percent, citing improvement in financial
market conditions, also drove down U.S. stock futures, gold and
other commodities. []. []
U.S. crude for March delivery <CLc1> fell to a low of
$77.95 a barrel, and was down $1.05 to $78.01 a barrel by 0357
GMT. It had settled at $79.06 the previous day, the highest
settlement since Jan. 14.
London Brent crude for April <LCOc1> lost 98 cents to
$76.80 a barrel/
"What is undermining oil prices at the moment is the sharp
jump in the dollar following the Fed's announcement," said Toby
Hassall, analyst with CWA Global Markets in Sydney.
"But this is not just about the influence the dollar has on
commodities, as there is also the concern of unwinding of
stimulus measures, and that could dampen the economic
recovery."
The U.S. dollar rose to a nine-month high against the euro,
while the dollar index, a gauge of its performance against six
major currencies, rose to its highest level in eight months
above 81.250 <.DXY>, up almost 1 percent. []
The stronger dollar makes oil and other commodities more
costly for holders of other currencies.
CRUDE INVENTORY UP
Data released on Thursday by the Energy Information
Administration (EIA) showed that crude stocks rose 3.1 million
barrels -- versus forecasts for a 2.2 million-barrel build --
to 334.5 million barrels in the week ended Feb. 12. []
Gasoline stocks were up 1.7 million barrels, but
distillates fell 2.9 million barrels.
"The EIA data was very much in line with expectations.
Fundamentally, we are still weak. Crude is up, gasoline is up
and distillates are down mainly because of the cold weather on
the East Coast," said Clarence Chu, analyst at Hudson Capital.
"If you were to look at employment numbers, people are still
losing jobs and we cannot be too upbeat about that. Oil prices
neared $80 a barrel, but technically, the resistence level for
oil price is around $78."
Heating oil and gasoline futures also trimmed their gains
as crude futures retreated from the day's high on Thursday.
The number of U.S. workers filing new applications for
unemployment insurance unexpectedly surged last week, while
producer prices increased sharply in January, raising potential
hurdles for the economic recovery. []
Initial claims for state jobless benefits increased 31,000
to 473,000, the Labor Department said on Thursday, and the
economy has lost 8.4 million jobs since recession struck in
December 2007.
However, oil could find some support from workers' strike
at six refineries owned by French giant Total <TOTF.PA>, while
concerns over Iran's nuclear programme could also boost
sentiment. []
The U.N. nuclear watchdog said on Thursday it feared Iran
may now be working to develop a nuclear-armed missile, as
Washington warned Tehran of "consequences" for ignoring
international demands to stop its atomic plan. Tehran says the
programme is for electricity generation. []
(Editing by Ramthan Hussain) ((lipeng.seng@thomsonreuters.com;
+65 6870 3086; Reuters Messaging:
lipeng.seng.reuters.com@reuters.net)) ((If you have a query or
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